Mutual fund selection criteria: evidence from Malaysia

Abstract

PurposeUnder its “Members Investment Scheme” strategic initiative, the Malaysian Employees Provident Fund (EPF) permits its members to invest part of their retirement savings in approved external funds. Given there is an increasing number of unit trust funds available in the market, it is not an easy task for members to make this investment choice decision. The purpose of this paper is to explore the perceived importance of fund selection criteria within the context of retirement savings in Malaysia. In addition, it also seeks to examine whether there is a relationship between religious affiliation and choice of fund.Design/methodology/approachA questionnaire‐survey was carried out among 440 individual EPF members.FindingsThe survey results show that the ranking of mutual fund selection criteria differs between Muslim and non‐Muslim members. Past performance was the most important criterion valued by the non‐Muslim EPF members. In line with conforming to religious belief, the fund's commitment to Islamic principles was the most important criterion considered by Muslim EPF members. Both type of religious group members also considered the overall reputation of the fund as important criterion in selecting a mutual fund.Research limitations/implicationsThe paper is subject to the normal limitations associated with survey research.Practical implicationsThe findings of this study can help fund management companies to better promote their funds to the right investors.Originality/valueThe paper provides empirical evidence regarding mutual fund selection criteria from the perspectives of individual investors.